GST and its Impact on eCommerce Businesses

In July, the government of India has introduced the Goods and Services Tax (GST) across the country. Hailed as the One Nation One tax policy, this unified taxation across the nation aims to eradicate tax hurdles and make the whole taxation process flexible and unified. Like all other businesses, eCommerce also has been affected by it. As an entrepreneur in the eCommerce industry, you need to be aware of the impacts of this unified taxation policy and accordingly adapt to changing situations. While not all areas of the GST will impact eCommerce, but there are some areas that will definitely impact the online businesses.

By having an idea of the provisions within the GST that are applicable for the eCommerce sector, you can start doing the needful and make your business compliant with the latest taxation process. A large part of the businesses in the eCommerce sector fall under the unorganized business sector, and with the introduction of GST, they have now been included in the ambit of taxation.

Trade barriers will be minimized

With the introduction of GST and unified taxation, trade barriers are expected to reduce significantly. eCommerce will now be able to follow a unified tax policy across all locations and states. Price will now be determined on a single tax, and not arbitrary taxes imposed by states. Moreover, as GST consists of entry tax, eCommerce businesses will now be able to set up distribution centers across different locations by paying one single unified tax.

Tax collection at source simplified

The Tax collection at source (TCS) is a new process followed in GST that aims to make the whole taxation process flexible. An eCommerce business will now have to collect the tax at the rate of two percent at source on the net value of the sales. Previously this used to vary across states. Now GST has minimized this process and you just need to pay unified TCS at the beginning.

eCommerce operators will have to be compliant

With the introduction of GST, eCommerce businesses will now need to report all supplies and the tax paid on them on a monthly basis. Moreover, the business has to provide information about the product and service code of each item level on an individual basis. This has been used to track and ensure that TCS is deducted in the right way.

According to the new GST process, it is now mandatory for suppliers in the eCommerce business to register under the GST scheme irrespective of the limit of 20 lakhs. You cannot opt for the composition scheme and pay a flat rate of two percent.

With the GST already in place, most of the eCommerce businesses have become GST compliant. Already around 95% have enrolled in the tax scheme and it is expected that more will follow suit.